BANGKOK–(BUSINESS WIRE)–Fabrinet (NYSE: FN), a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, today announced its financial results for its fourth quarter and fiscal year ended June 28, 2019.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We are pleased with our strong revenue and earnings performance in the fourth quarter, which represented quarterly records for the company. These results reflect the diversity of our customers and the markets that we serve.”

Grady continued, “These strong fourth quarter results also capped the best fiscal year in our history, as we generated record revenue, profitability and operating cash flows, on a full year basis. While we expect first quarter revenue and EPS to moderate from our record fourth quarter performance, we remain optimistic that our leadership as a trusted manufacturing partner positions us for continued success in fiscal 2020 and beyond.”

Fourth Quarter Fiscal Year 2019 Financial Highlights

GAAP Results

Revenue for the fourth quarter of fiscal year 2019 was $405.1 million, compared to revenue of $345.3 million for the comparable period in fiscal year 2018.

GAAP net income for the fourth quarter of fiscal year 2019 was $33.0 million, compared to GAAP net income of $22.8 million for the fourth quarter of fiscal year 2018. GAAP net income for the fourth quarter of fiscal year 2019 included a foreign exchange gain of $1.8 million, or $0.05 per diluted share, compared to a foreign exchange loss of ($0.9) million, or ($0.02) per diluted share, for the fourth quarter of fiscal year 2018.

GAAP net income per diluted share for the fourth quarter of fiscal year 2019 was $0.88, compared to GAAP net income per diluted share of $0.60 for the fourth quarter of fiscal year 2018.

Non-GAAP Results

Non-GAAP net income for the fourth quarter of fiscal year 2019 was $37.6 million, compared to non-GAAP net income of $30.7 million for the fourth quarter of fiscal year 2018. Non-GAAP net income for the fourth quarter of fiscal year 2019 included a foreign exchange gain of $1.8 million, or $0.05 per diluted share, compared to a foreign exchange loss of ($0.9) million, or ($0.02) per diluted share, for the fourth quarter of fiscal year 2018.

Non-GAAP net income per diluted share for the fourth quarter of fiscal year 2019 was $1.00, compared to non-GAAP net income per diluted share of $0.81 for the same period a year ago.

Fiscal Year 2019 Financial Highlights

GAAP Results

Revenue for fiscal year 2019 was $1,584.3 million, an increase of 15% compared to revenue of $1,371.9 million for fiscal year 2018.

GAAP net income for fiscal year 2019 was $121.0 million, an increase of 44% compared to GAAP net income of $84.2 million for fiscal year 2018. GAAP net income for fiscal year 2019 included a foreign exchange gain of $1.4 million, or $0.04 per diluted share, compared to a foreign exchange loss of ($6.6) million, or ($0.17) per diluted share, for fiscal year 2018.

GAAP net income per diluted share for fiscal year 2019 was $3.23, compared to GAAP net income per diluted share of $2.21 for fiscal year 2018.

Non-GAAP Results

Non-GAAP net income for fiscal year 2019 was $142.6 million, an increase of 26% compared to non-GAAP net income of $113.5 million for fiscal year 2018. Non-GAAP net income for fiscal year 2019 included a foreign exchange gain of $1.4 million, or $0.04 per diluted share, compared to a foreign exchange loss of ($6.6) million, or ($0.17) per diluted share, for fiscal year 2018.

Non-GAAP net income per diluted share for fiscal year 2019 was $3.81, compared to non-GAAP net income per diluted share of $2.98 for fiscal year 2018.

Business Outlook

Based on information available as of August 19, 2019, Fabrinet is issuing guidance for its first quarter of fiscal year 2020 ending September 27, 2019, as follows:

Fabrinet expects first quarter revenue to be in the range of $386 million to $394 million.

GAAP net income per diluted share is expected to be in the range of $0.64 to $0.68, based on approximately 37.4 million fully diluted shares outstanding.

Non-GAAP net income per diluted share is expected to be in the range of $0.80 to $0.84, based on approximately 37.4 million fully diluted shares outstanding.

This press release and any other information related to the call will also be posted on Fabrinet’s website at http://investor.fabrinet.com. A recorded version of this webcast will be available approximately two hours after the call and will be archived on Fabrinet’s website for a period of one year.

About Fabrinet

Fabrinet is a leading provider of advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and subsystems, automotive components, medical devices, industrial lasers and sensors. Fabrinet offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, advanced packaging, integration, final assembly and test. Fabrinet focuses on production of high complexity products in any mix and any volume. Fabrinet maintains engineering and manufacturing resources and facilities in Thailand, the United States of America, the People’s Republic of China and the United Kingdom. For more information visit: www.fabrinet.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include: (1) statements regarding our expectation that revenue and EPS for the first quarter of fiscal year 2020 will moderate from our performance for the fourth quarter of fiscal year 2019, as well as our expectation that we will have success in fiscal year 2020 and beyond; and (2) all of the statements under the “Business Outlook” section regarding our expected revenue, GAAP and non-GAAP net income per share, and fully diluted shares outstanding for the first quarter of fiscal year 2020. These forward-looking statements involve risks and uncertainties, and actual results could vary materially from these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: less customer demand for our products and services than forecasted; less growth in the optical communications, industrial lasers and sensors markets than we forecast; difficulties expanding into additional markets, such as the semiconductor processing, biotechnology, metrology and materials processing markets; increased competition in the optical manufacturing services markets; difficulties in delivering products and services that compete effectively from a price and performance perspective; our reliance on a small number of customers and suppliers; difficulties in managing our operating costs; difficulties in managing and operating our business across multiple countries (including Thailand, the People’s Republic of China, the U.S. and the U.K.); and other important factors as described in reports and documents we file from time to time with the Securities and Exchange Commission (SEC), including the factors described under the section captioned “Risk Factors” in our Quarterly Report on Form 10-Q, filed on May 7, 2019. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

Use of Non-GAAP Financials

We refer to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding our ongoing operational performance. Non-GAAP net income excludes: share-based compensation expenses; depreciation of fair value uplift; ASC 606 adoption impact on gross profit; severance payments; expenses related to our CFO/CEO search; amortization of intangibles; business combination expenses and consulting fee; amortization of debt issuance costs; and expenses related to reduction in workforce. We have excluded these items in order to enhance investors’ understanding of our underlying operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures.

These non-GAAP financial measures are used to: (1) measure company performance against historical results, (2) facilitate comparisons to our competitors’ operating results, and (3) allow greater transparency with respect to information used by management in making financial and operational decisions. In addition, these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation.

FABRINET

CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars, except share data and par value)

June 28,

2019

June 29,

2018

Assets

Current assets

Cash and cash equivalents

$

180,839

$

158,102

Restricted cash in connection with business acquisition

—

3,331

Short-term investments

256,493

174,269

Trade accounts receivable, net

260,602

246,912

Contract assets

12,447

—

Inventory, net

293,612

257,687

Prepaid expenses

8,827

8,061

Other current assets

11,015

5,948

Total current assets

1,023,835

854,310

Non-current assets

Long-term restricted cash

7,402

—

Property, plant and equipment, net

210,686

219,640

Intangibles, net

3,887

4,880

Goodwill

3,705

3,828

Deferred tax assets

5,679

5,280

Other non-current assets

124

80

Total non-current assets

231,483

233,708

Total Assets

$

1,255,318

$

1,088,018

Liabilities and Shareholders’ Equity

Current liabilities

Bank borrowings

$

3,250

$

3,250

Trade accounts payable

257,617

220,159

Contract liabilities

2,239

—

Capital lease liability, current portion

398

451

Income tax payable

1,801

709

Deferred liability in connection with business acquisition

—

3,331

Accrued payroll, bonus and related expenses

16,510

13,476

Accrued expenses

8,997

9,013

Other payables

22,236

19,728

Total current liabilities

313,048

270,117

Non-current liabilities

Long-term loan from bank

57,688

60,938

Deferred tax liability

3,561

2,284

Capital lease liability, non-current portion

102

516

Severance liabilities

15,209

10,162

Other non-current liabilities

2,611

3,062

Total non-current liabilities

79,171

76,962

Total Liabilities

392,219

347,079

Commitments and contingencies

Shareholders’ equity

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of June 28, 2019 and June 29, 2018)

—

—

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 38,230,753 shares and 37,723,733 shares issued as of June 28, 2019 and June 29, 2018, respectively; and 36,841,650 shares and 36,434,630 shares outstanding as of June 28, 2019 and June 29, 2018, respectively)

382

377

Additional paid-in capital

158,299

151,797

Less: Treasury shares (1,389,103 shares and 1,289,103 shares as of June 28, 2019 and June 29, 2018, respectively)

(47,779)

(42,401)

Accumulated other comprehensive loss

(2,386)

(1,257)

Retained earnings

754,583

632,423

Total Shareholders’ Equity

863,099

740,939

Total Liabilities and Shareholders’ Equity

$

1,255,318

$

1,088,018

FABRINET

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended

Twelve Months Ended

(in thousands of U.S. dollars, except per share data)

June 28,

2019

June 29,

2018

June 28,

2019

June 29,

2018

Revenues

$

405,127

$

345,327

$

1,584,335

$

1,371,925

Cost of revenues

(358,501

)

(306,346

)

(1,405,111

)

(1,218,513

)

Gross profit

46,626

38,981

179,224

153,412

Selling, general and administrative expenses

(13,771

)

(16,559

)

(55,067

)

(57,812

)

Expenses related to reduction in workforce

(789

)

—

(1,516

)

(1,776

)

Operating income

32,066

22,422

122,641

93,824

Interest income

1,929

1,371

6,699

3,925

Interest expense

(1,708

)

(1,107

)

(5,381

)

(3,606

)

Foreign exchange gain (loss), net

1,814

(877

)

1,406

(6,587

)

Other income, net

70

35

868

473

Income before income taxes

34,171

21,844

126,233

88,029

Income tax expense

(1,214

)

924

(5,278

)

(3,862

)

Net income

32,957

22,768

120,955

84,167

Other comprehensive loss, net of tax:

Change in net unrealized gain (loss) on available-for-sale securities

644

29

2,043

(1,019

)

Change in net unrealized gain (loss) on derivative instruments

1

—

(1

)

(1

)

Change in retirement benefits plan – prior service cost

(2,537

)

—

(2,537

)

—

Change in foreign currency translation adjustment

(415

)

(1,247

)

(634

)

111

Total other comprehensive loss, net of tax

(2,307

)

(1,218

)

(1,129

)

(909

)

Net comprehensive income

30,650

21,550

$

119,826

$

83,258

Earnings per share

Basic

$

0.89

$

0.62

$

3.29

$

2.26

Diluted

$

0.88

$

0.60

$

3.23

$

2.21

Weighted average number of ordinary shares outstanding

(thousands of shares)

Basic

36,836

36,828

36,798

37,257

Diluted

37,511

37,766

37,415

38,035

FABRINET

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended

(in thousands of U. S. dollars)

June 28,

2019

June 29,

2018

Cash flows from operating activities

Net income

$

120,955

$

84,167

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization

29,944

29,087

(Gain) loss on disposal and impairment of property, plant and equipment

(4

)

18

Loss on disposal of intangibles

149

447

Loss from sales and maturities of available-for-sale securities

135

364

Amortization of investment discount

(592

)

(506

)

Amortization of deferred debt issuance costs

—

994

Allowance for doubtful accounts (reversal)

36

(23

)

Unrealized (gain) loss on exchange rate and fair value of derivative

(6,980

)

4,222

Share-based compensation

17,157

22,581

Deferred income tax

879

(2,074

)

Severance liabilities

3,343

1,801

Other non-cash expenses

(450

)

332

(Reversal of) Inventory obsolescence

(563

)

(436

)

Changes in operating assets and liabilities

Trade accounts receivable

(13,494

)

17,852

Contract assets

(2,570

)

—

Inventory

(44,035

)

(19,432

)

Other current assets and non-current assets

(186

)

(4,464

)

Trade accounts payable

38,807

3,502

Contract liabilities

2,239

—

Income tax payable

1,092

(1,267

)

Other current liabilities and non-current liabilities

1,532

915

Net cash provided by operating activities

147,394

138,080

Cash flows from investing activities

Purchase of short-term investments

(233,080

)

(152,908

)

Proceeds from sales of short-term investments

99,142

61,795

Proceeds from maturities of short-term investments

54,215

67,417

Payments in connection with business acquisition, net of cash acquired

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of same amounts shown in the consolidated statements of cash flows:

(amount in thousands)

As of

June 28,

2019

As of

June 29,

2018

Cash and cash equivalents

$

180,839

$

158,102

Restricted cash

7,402

3,331

Cash, cash equivalents and restricted cash

$

188,241

$

161,433

FABRINET

RECONCILIATION OF ASC 605 TO ASC 606

Three Months Ended

June 28,2019

(in thousands of U.S. dollars, except per share data)

As reported

under

ASC 606

Adjustment

ASC 605

Revenues

$

405,127

$

(1,894)

$

403,233

Cost of revenues

(357,144)

1,404

(355,740)

Gross profit

47,983

(490)

47,493

Selling, general and administrative expenses

(11,267)

—

(11,267)

Operating income

36,716

(490)

36,226

Interest income

1,929

(10)

1,919

Interest expense

(1,708)

—

(1,708)

Foreign exchange gain, net

1,814

—

1,814

Other income, net

70

—

70

Income before income taxes

38,821

(500)

38,321

Income tax expense

(1,214)

—

(1,214)

Net income

37,607

(500)

37,107

Other comprehensive loss, net of tax:

Change in net unrealized gain on available-for-sale securities

644

—

644

Change in net unrealized gain on derivative instruments

1

—

1

Change in retirement benefits plan – prior service cost

(2,537)

—

(2,537)

Change in foreign currency translation adjustment

(415)

—

(415)

Total other comprehensive loss, net of tax

(2,307)

—

(2,307)

Net comprehensive income

$

35,300

$

(500)

$

34,800

Earnings per share

Basic

$

1.02

$

(0.01)

$

1.01

Diluted

$

1.00

$

(0.01)

$

0.99

Weighted-average number of ordinary shares outstanding (thousands of shares)

Basic

36,836

—

36,836

Diluted

37,511

—

37,511

FABRINET

RECONCILIATION OF ASC 605 TO ASC 606

Twelve Months Ended

June 28,2019

(in thousands of U.S. dollars, except per share data)

As reported

under

ASC 606

Adjustment

ASC 605

Revenues

$

1,584,055

$

(2,560)

$

1,581,495

Cost of revenues

(1,398,866)

1,745

(1,397,121)

Gross profit

185,189

(815)

184,374

Selling, general and administrative expenses

(40,909)

—

(40,909)

Operating income

144,280

(815)

143,465

Interest income

6,699

(10)

6,689

Interest expense

(5,381)

—

(5,381)

Foreign exchange gain, net

1,406

—

1,406

Other income, net

868

—

868

Income before income taxes

147,872

(825)

147,047

Income tax expense

(5,278)

—

(5,278)

Net income

142,594

(825)

141,769

Other comprehensive loss, net of tax:

Change in net unrealized gain on available-for-sale securities

2,043

—

2,043

Change in net unrealized loss on derivative instruments

(1)

—

(1)

Change in retirement benefits plan – prior service cost

(2,537)

—

(2,537)

Change in foreign currency translation adjustment

(634)

—

(634)

Total other comprehensive loss, net of tax

(1,129)

—

(1,129)

Net comprehensive income

$

141,465

$

(825)

$

140,640

Earnings per share

Basic

$

3.88

$

(0.03)

$

3.85

Diluted

$

3.81

$

(0.02)

$

3.79

Weighted-average number of ordinary shares outstanding (thousands of shares)